Despite the threats imposed on our country by ever increasing oil imports, higher prices and environmental concerns, biofuels continue to be the subject of false assumptions and unfounded concerns based on incomplete and inaccurate opinions. As a result, there is great demand for thorough and accurate information about biofuels from government, private enterprise, the media and most importantly consumers. ABC is actively working to counter the myths and distortions surrounding the development of biofuels by producing publications and other educational information. To request more information on any of the points listed below, or if you have an idea for a new publication, please contact us.

There have been serious questions raised about the impacts of biofuels. These questions are perfectly reasonable and therefore should be addressed in a responsible and thoughtful manner by making direct comparisons to the petroleum they are meant to replace.

Benefits of Biofuels

1. Energy Security. By producing fuel domestically we reduce our dependence on foreign oil. We can be comletely free from oil by 2040.
2. Environmental. Since biofuels are nearly carbon neutral they contribute very little greenhouse gases to global warming. Biofuels also reduce many other harmful emissions dramatically and in some cases eliminate them completely. By reducing emissions Biofuels can aid greatly in improving air and water quality for children and those living in major metropolitan areas. Those places where pollution is at it's worst are the very places that would benefit the most.
3. Economic. Producing our own fuel creates jobs and helps reduce our trade deficit by keeping our fuel buying dollars here at home and we must diversify our energy portfolio if we are to remain competitive in the world marketplace.
   
4. Sustainability. Since biofuels are produced from various sources of biomass the supply is almost limitless and growing biofuels actually provides for more available food; not less.
5. Greater Geopolitical Stability. When more and more nations start producing biofuels that effectively levels the playing field and hostile oil producing regimes will no longer have a stranglehold on the rest of the world.

Biofuels can match oil production.

Even though some vested interests are trying to downplay the potential of biofuels, energy analysts and scientists know that their potential is truly vast . The director of Harvard University’s Center for International Development (John F. Kennedy School of Government), professor Ricardo Hausmann, joins those analysts and presents a well argued view on what would be needed for a sustainable bioenergy future to emerge. Writing in the Financial Times, he goes so far as to state that 'biofuels can match oil production'.

Because professor Hausmann is a well known analyst of development economics and has served in major international development organisations (World Bank, Inter-American Development Bank, and as a minister in the Venezuelan government) and thus his insight carries some authority, we republish his essay here in full:

Peering into the future seldom produces a clear picture, Hausmann writes. But this is not the case with bio-energy. Its long-term impacts on the global economy appear to be pretty clear, making many long-term predictions quite compelling, including the demise of the price-setting power of the Organisation of the Petroleum Exporting Countries and the end of agricultural protectionism.

First, technology is bound to deliver a biofuel that will be competitive with fossil energy at something like current prices. It probably already has. Brazil has been exporting ethanol to the US at an average delivery price of $1.45 for an amount with the energy equivalence of a gallon of petrol. It is doing so profitably and in increasing amounts, in spite of a 54 cents a gallon tariff to protect American maize-based ethanol producers. Many countries are following suit.

But ethanol is an inconvenient chemical compound that is corrosive and soluble in water, thus limiting its immediate market to that of a gasoline additive. However, this is just the Betamax phase of the industry. There is plenty of private venture capital money being poured into finding more efficient ways of extracting energy from biomass and delivering it to transport and power systems. Over time, the technology will also become more flexible, allowing more crops to be used as feedstock, not just the current choice of sugarcane, maize and palm oil. New technologies will be able to extract energy from cellulose, allowing the use of pastures such as switch grass as well as the refuse of current food production.

Second, the world is full of under-utilised land that can grow the biomass that the new technology will require. According to the Food and Agriculture Organisation, the world has a bit less than 1.4bn hectares under cultivation. But using the Geographic Information System database, Rodrigo Wagner and I have estimated that there are some 95 countries that have more than 700m hectares of good quality land that is not being cultivated. Depending on assumptions about productivity per hectare, today’s oil production represents the equivalent of some 500m to 1bn hectares of biofuels. So the production potential of biofuels is in the same ball park as oil production today.

Third, even if only partially used, this large potential biofuels supply will cap the price of oil because its supply is much more elastic than the supply of oil. This will cause the price of oil to be set at the marginal cost of bio-energy, independently of the production decisions of Opec. If Opec tries to raise prices above the price at which biofuels become highly profitable, it will only crowd in more biofuels. Oil producers will still be rich, but they will not have incentives to form a cartel:

Fourth, the price of agricultural land will be influenced by its potential use for bio-energy. As farmers choose what crop would suit them best, they will change what they produce and hence the whole system of relative prices of agricultural produce. This will imply a very large increase in the demand for agricultural land. Its price and that of the products that use it intensively – such as food and cotton – will go up. By how much? This will depend not only on the cost of bio-energy but also on how much additional land is put to use and the degree to which food crops will be complements or substitutes of bio-energy: they would be substitutes if switch grass were planted instead of soybeans; they will be complements if biofuels are made out of wheat stalk. My bet is that they will tend to be more substitutes than complements and the relative price of food will go up.

Fifth, the increase in the price of agricultural land and of food will relieve governments from the current political pressure to protect the agricultural sector. Governments that, as a consequence of the land glut, have been protecting and subsidising farmers will see them grow rich either because they “plant” biofuels themselves or because other producers switch into them, lowering the supply and increasing the price of other crops.

By contrast, consumers will be less enthusiastic and demand that something be done about the price of food.

The obvious solution will be to cut back on protectionism and liberalise trade in agriculture.

Sixth, the countries that have the largest endowment of under-utilised lands are in the developing world, especially Africa and Latin America. Putting that land into production will require a type of infrastructure that – as opposed to the dedicated variety required by extractive industries – usually crowds in other forms of investment by lowering transport costs in ample regions of the country.

Bio-energy will make those infrastructure investments socially profitable, creating a possible stepping stone into other industries.

Some policy action in industrialised countries will be required to make this world possible. Biofuels policy needs to stop being seen through the prism of agricultural support policy – which justifies a 54 cents a gallon US tariff on Brazilian ethanol – and instead become the purview of energy and environmental policies. Standards will have to be developed to allow the energy and automotive industries to co-ordinate technologies. To make this scenario appealing, the impact of the expansion of the agricultural frontier on the environment and biodiversity, and the distributive effects of the rise in food prices will have to be addressed.

But these problems seem solvable given the expected political benefits in terms of lower net carbon emissions, more energy security, more efficient agricultural policies and greater opportunities for sustainable development.